Unfortunately for convenience store marketers, control over gas price fluctuations is out of their hands. However, according to the latest IRI Point of View, “Gas Price Fluctuations Fuel a Convenience Channel Opportunity,” marketers do have the power to use innovative strategies to not only reduce the negative impact of gas prices, but also entice even more shoppers to walk through their doors and put additional items in their baskets. In fact, even a one point increase in converting a shopper from fuel to inside the store will bring more than $700 million to the industry’s bottom line in a single year.

“Since more than 80% of convenience stores sell gas, and changing gas prices affect shopping trips and basket size, convenience store decision makers must develop approaches for rapidly adapting their offerings and promotional strategies in an environment of variable and generally upward trending fuel prices,” said Carl Boraca, author of the IRI Point of View and vice president, content product management, IRI. “Doing so requires a solid and granular understanding of how to draw more shoppers into the store, even in the face of high gas prices, and knowing, which categories are most impacted by fluctuating gas prices. Connecting these dots could boost industry earnings by millions—possibly even billions—of dollars annually.”

Gas Price RollercoasterIRI’s Q2 2013 MarketPulse survey, which provides insights regarding the impacts of fluctuating gas prices on consumer packaged goods (CPG) related behavior, found that 44% of consumers are likely to cut spending on groceries if gas prices rise by 50 cents per gallon. More than half (57%) of consumers will reduce trips, and 52% will switch spending to stores that are closer to home, which may or may not include grocery stores.

The largest single convenience store shopper group is Millennials. Because they are generally on strict budgets, they are impacted greatly by an increase in gas prices. In fact, 49% of Millennials say they will make fewer, larger trips to reduce gas consumption; 49% will become heavily focused on price; and 40% will reduce the number of stores they visit.

Of course, many factors will influence the actual impact of fluctuating gas prices on shopper behavior, including store location and banner, shopper mindset, and simple needs and resources. In general, though, historical trends provide a general sense of purchase elasticity at the department level.

Specifically, the healthcare and general merchandise categories are impacted the most. These departments have traditionally been “secondary” areas for convenience stores, so they tend to be first to get eliminated or re-directed to an alternate or even lower-priced channel by consumers. In contrast, beverages, which tend to be a key driver of trips for convenience stores, do not see a sharp fall-off in sales when gas prices climb.

Enticing ConsumersOutdoor advertising, which includes pump toppers, window displays, stacks/displays outside the store (e.g. soda pallet), and ad or video displays on top of pumps, has proven effective at driving fuel buyers into the retail store. In fact, analysis demonstrates that product growth is twice as high when outdoor causal advertising is used compared to when it is absent across a variety of key convenience categories.

Despite the power of this medium, outdoor advertising is, generally speaking, underdeveloped by convenience store marketers. Even in the warmer months, which are a peak time for outdoor advertising, less than 5% of convenience stores’ all commodity volume (ACV) is supported with outside displays.

In addition, marketers must understand that no two shoppers are alike. Each shopper follows a different path when making different purchases. Convenience store markets must thoroughly understand their various shoppers, what activates them, which offers they find most appealing, and how to use the right media to reach them.

“Convenience stores with gas pumps average 277 fill-up trips per day,” added Boraca. “And, each trip represents an opportunity to sell goods inside the store. To boost the fuel-to-shopper conversion rate and drive revenue growth, convenience store marketers must empower their decision making with research. Through analytics, we know which shoppers and products are going to be most impacted when gas prices rise. We also know the message and the media that will influence the ideal audience for combating this challenge.”

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